Whether or not to appeal a marketplace notice is a more complicated decision than it may appear at first glance. If an employer receives a marketplace notice, it means that at least one of the organization's employees qualified for a subsidy when purchasing health insurance coverage through a marketplace.

You've Been Notified ... Now What?

The primary ramification of receiving a marketplace notice is that it alerts the employer of potential liability under the employer shared responsibility regulations. Assuming the employer has offered coverage to at least 95 percent of its full-time employees, it can expect to pay a penalty equal to $3,000 for each full-time employee who received a subsidy due to the offer not meeting the affordability or minimum value thresholds.

In the event an employer believes it has received a marketplace notice in error (i.e. it believes the employee in question was offered coverage that was affordable and provided minimum value), it has the right to appeal. Employers have 90 days from the date indicated on the notice from the marketplace to file an appeal. It is important to note, however, that each marketplace notice reminds employers that the IRS, not the marketplace, determines whether an employer will owe an employer shared responsibility assessment.

The appeal can be filed in one of two ways and mailed or faxed to the Department of Health and Human Services:

  1. By filling out the Employer Appeal Request Form; or
  2. By submitting a letter with the following information: business name, employer ID number (EIN), employer's primary contact name, phone number and address, the reason for the appeal and information from the marketplace notice received, including date and employee information.

More Than Just Financial Repercussions

It may seem obvious that filing an appeal is the proper course of action for an organization that thinks it has wrongly received a marketplace notice. After all, no organization wants to pay a penalty that has been improperly assessed. However, the organization must consider the full financial picture. If the employer successfully appeals the penalty, the employee may be required to return the amount of their subsidy, because they were not really eligible for it. As a result, the employee(s) in question may elect to enroll in the organization's health care plan the following year instead of purchasing insurance on an exchange. If the organization's premium contributions for those employees ends up being higher than the amount of the penalties, the impact of appealing could result in a net negative on the organization's bottom line.

Moreover, you should understand that this decision is not a purely financial one. An organization that takes actions that result in the loss of valuable subsidies for its employees is likely to find itself with an employee relations problem on its hands. Of course, weighing the relative costs of additional capital against employee morale is not an easy task and will vary from one organization to the next.

There will never be a one-size-fits-all answer to delicate compliance issues such as this one. Every organization has to assess on a case-by-case the potential costs, in both dollars and morale, to determine how best to proceed once a marketplace notice is received.

Tags: healthcare